A striking thing in the world of biotech is that to date there are no European examples that are close to matching US companies like Amgen, Gilead or Biogen on the global stage1. This is true despite the fact that there are flourishing biotech hubs across Europe including in Switzerland, Denmark, UK, Germany and more recently the Netherlands.One example of the strength of European biotech has been demonstrated during the pandemic. Two of the three major anti-Covid vaccines were originated in Europe, Pfizer’s vaccine coming from BioNTech in Germany and AstraZeneca’s from Oxford University in the UK. It is therefore interesting to consider why there is such a disparity in commercial success between European and US biotech companies.
Certainly historically, US biotechs have enjoyed important competitive advantages. To start with, they have a large domestic market which relative to Europe has very few price controls. They also have many great universities whose biomedical research has benefited from massive spending by federal goverments. They benefit too from an efficient system of transferring technology from academic labs to business as well as from a developed venture capital market and NASDAQ, which has been described as a congenial home for young, high growth companies. Additionally, it should be pointed out that the success of pioneers like Genetech, who successfully brought genetically engineered human insulin to market, boosted the confidence of the US investment community, leading in turn to more specialist investors as well as generating a growing pool of experienced managers2.
Even today, when biotech in Europe is described as booming, the US still continues to enjoy financial advantages with respect to appetite for risk, levels of knowledge and expertise concerning biotechs. There is a difference in scale too, as demonstrated by the ammounts of venture capital raised. In 2020, British biotechs raised more than anwhere else in Europe but the amount of $1.9bn was dwarfed relative to the US biotech hubs with Massachusetts raising $6.4bn and San Francisco $6.1.3 Also when European biotechs go public they often tend towards the NASDAQ attracted by the higher valuations and simpler regulations.
Another important and highly relevant factor is that pharma has a global hunger to acquire the right biotech products or companies. This offers the opportunity for European biotechs to reach a certain size and sell as exemplified by Sanofi’s $4.8bn acquisition of Belgium biotech Ablynx and more recently of the UK’s Kymab for $1.45bn. Alternatively, rather than market products themselves, they can licence out to pharma companies. The three largest biotechs in Europe, BioNTech, Genmab and Horizon Therapeutics, all currently prefer to work with partners in big pharma. To be fair these kinds of deals and arrangements are happening in the US too, one of the more striking being European pharma giant AstraZeneca’s acquisition of US biotech Alexion for $39bn.
If a European based biotech is to remain independent and develop a global marketing presence like Amgen and other US big biotech companies, it will need to convince investors in a less confident financial environment that this is the route to the greatest returns. The US system had the patience and belief to allow companies long enough to fully blossom. Gilead took 15 years to achieve profitability and another 10 to reach big biotech status. Whether this kind of support will occur in Europe no one yet knows, although there is plenty of optimism in the sector.
Ultimately to be a success on the world stage, a European company must conquer the US, the largest and most well developed biotech market on the planet. To win in this fiercely competitive environment it will need both a fantastic product and a very high level of talent and experience in marketing as well as other disciplines. In the words of a famous American president, ‘nothing worth having comes easy.’ With attractive alternative routes to success on the table, it is therefore remains speculative as to whether an independent European biotech company will desire to go all the way. To do so, it will need to justify the optimism by turning Europe’s reputation for great science into a worldwide marketing success.
- Bhandari M et al. The UK Biotech sector: The path to global leadership. McKinsey&Company 2021.
- Owen G. The secret of a world class biotech sector. Financial Times. 2016.
- Breathing life into Britain’s life sciences industry. The Economist. 2021